NatWest chair Rick Haythornthwaite told the UK bank he spent as little as one hour a week at an oil company involved in a massive fraud on Malaysia’s 1MDB wealth fund, people briefed on the matter said, despite documents suggesting a bigger commitment.
Haythornthwaite’s work at PetroSaudi International has come under new scrutiny after a Swiss court last week convicted its executives Tarek Obaid and Patrick Mahony of embezzling more than $1.8bn from 1MDB in what prosecutors branded the “scam of the century”.
Haythornthwaite, 67, has not been accused of any wrongdoing. But the judgment has focused attention on his decision to join PetroSaudi, the nature of his work there and his choice to remain as long as he did.
The Swiss case has raised further questions about NatWest’s process to appoint Haythornthwaite and whether it took his PetroSaudi stint fully into account.
Haythornthwaite told NatWest he worked as a part-time adviser for a UK subsidiary of PetroSaudi for just one to three hours a week between 2008 and 2016, according to people familiar with the discussions.
But his formal contract, which was first made public last year, states he would work at least two and a half days a week, with the title chief operating officer, a salary of £200,000, an additional £115,000 for a personal assistant and two provisional bonuses of £1mn each to be paid in 2011 and 2014.
His duties would span the PetroSaudi group and the former BP executive would be expected to “leverage [his] reputation and network”, lead operational aspects of business development and provide “experiential and fact-based reassurance to investors and creditors”, according to a schedule to the contract.
Haythornwaite used the titles “president”, “chairman of the operating businesses” and “adviser” at PetroSaudi UK at various stages during his time at the company.
In a corporate presentation branded “Petrosaudi Oil Services”, Haythornthwaite is listed as “key management” alongside Obaid and Mahony, who last week were sentenced respectively to seven and six years in prison.
Prosecutors described the pair as “calculating, manipulative and obscenely greedy”, sinking the stolen money into gems, properties, private jets and yachts. Some of the embezzled cash was used to pay the salaries of Haythornthwaite and other PetroSaudi employees in the UK, according to the indictment.
Haythornthwaite succeeded Sir Howard Davies as chair of NatWest in April, as it sought to restore boardroom stability following the exit of chief executive Alison Rose, who resigned over a leak to journalists about the closure of the politician Nigel Farage’s account.
The fraud at the heart of PetroSaudi’s lucrative dealings with 1MDB surfaced publicly in February 2015 in the Sarawak Report blog, which cited a trove of leaked company emails.
Within months, the 1MDB case hit the global headlines with the revelation that Najib Razak, Malaysia’s then prime minister who was later jailed for corruption, had received $680mn linked to 1MDB into his personal bank account.
By September 2015, Swiss authorities had said they were probing suspected crimes relating to 1MDB funds.
Haythornthwaite stayed in his PetroSaudi role through this period. In November 2015, he told the Financial Times he had “found no evidence to support the various allegations that have been made about PetroSaudi”.
When Sarawak Report’s Clare Rewcastle Brown emailed questions to Haythornthwaite the following month, he responded that she was an “active campaigning blogger” and “even if I were to be in possession of information relevant to your query, I would be unwilling to assist you in your questionable activities”.
Haythornthwaite now regrets that his “dismissive” response gave the mistaken impression he was “blind to or complacent about” the allegations, according to a person close to him.
A spokesperson for Haythornthwaite said the corruption highlighted by the Swiss case had been concealed from him and related to decisions at PetroSaudi’s parent company level in which he had no involvement.
“When he was made aware of concerns, he promptly undertook his own investigations, including having legal experts review the available data,” the spokesperson said. “Although none of this raised the suggestion of a need to resign his position, Rick took the decision to leave in early 2016.”
NatWest did consider Haythornthwaite’s PetroSaudi role during his selection, according to people briefed on the matter. He was never a director or office holder of any PetroSaudi group company and played no role in its management, NatWest concluded. “He is a highly experienced FTSE Chair and NatWest Group conducted a thorough due diligence process during his appointment in line with our regulatory obligations,” the bank told the FT.
The 1MDB case has already brought years of difficulties to NatWest, whose Coutts subsidiary is being sued by the fund along with JPMorgan and Deutsche Bank for allegedly handling stolen money. Coutts held accounts for Good Star, a company controlled by fugitive financier Jho Low, which received 1MDB money intended for the PetroSaudi joint venture.
Coutts also advised Haythornthwaite over the £2mn in bonus payments he was in line to receive, according to a 2010 email from him to Mahony, in which he discussed a structure for “ring-fencing retention-related capital without incurring tax”.
Contents of email from Haythornthwaite to Mahony
I meant to mention this on the phone — I can eleaborate [sic] when we meet…
Having looked into ways of ring-fencing retention-related capital without incurring tax, it would appear to be possible via the following
Coutts-recommended route.
1. The contract would state that the company will pay me £2m net if I remain through to 1 September 2014 unless dismissed for cause.
Other clauses regarding breach, illness would need to be crafted as per the agreed Term Sheet.
2. On each vesting date the gross funds would be placed in an offshore Zurich International Portfolio Bond Wrapper which in turn will be
placed in a discretionary trust with me as a co-trustee with a PetroSaudi person.
3. The Bond Wrapper allows for investment in collective bonds and capital protected bonds with all income being tax free. The Bond
includes life insurance.
4. As I have no rights to the money until the retention conditions are met then there is no tax liability.
5. On the maturity date, the trustees determing the dstributions between me (the earned net amount), the HMRC (dependent on where
the company has decided that I should live at the time) and the remainder (incluidng all investment gains) to PetroSaudi.
This is a simple structure that can be put in place rapidly and at low cost by Coutts if we so wish.
Regards,
Rick Haythornthwaite
PetroSaudi International (UK) Ltd
1 Curzon Street
London W1J 5HD
Two tax experts who reviewed the proposed arrangement for the FT questioned whether it would have survived challenge by UK tax authorities, with one describing it as “highly aggressive”.
NatWest said the proposal was never enacted, adding the bank had an opinion from two independent tax experts who “concluded that at that time it was within the letter of the legislation”.
Haythornthwaite now feels a “sense of betrayal at the egregious breach of trust” at the centre of the PetroSaudi case, according to the person close to him. All those affected by the crimes that took place while he was at the company and have now been exposed by the Swiss court have his “deepest sympathies”, the person added.
Additional reporting by Cynthia O’Murchu
